Best Cash Advance Credit Card
If you’re a little short of money and don’t have savings accounts, emergency funds or generous friends to turn to, your options are pretty limited. What you might not know is that you can use your credit card to withdraw cash, just like you would with a debit card. But as helpful as that sounds, it’s one of the worst things you can do and, in most cases, it will come back to haunt you.
When you use your credit card at an ATM, you’re taking advantage of something known as a “cash advance”, and the majority of credit cards will charge you for this. The end result is that your debt grows, your problems increase, and the next time you’re faced with this dilemma, your options are even fewer.
However, there are ways that you can avoid cash advance fees, including credit cards that don’t charge them.
$0 Credit Card Cash Advance Fees
Take a look at this list of the best credit cards with no cash advances. All these cards will check your creditworthiness and you will likely be refused if you have no credit or bad credit.
PenFed Platinum Rewards
As the name suggests, the PenFed Platinum is a rewards credit card, offering between 1 and 5 points for different credit card purchases, with the best rates reserved for money spent at gas stations. The regular purchase APR is very respectable, there is no cash advance fee and the cash advance APR is low.
There is a bonus of $100 in statement credit when you spend $1,500 in the first three months and all cardholders can redeem using gift cards, prepaid cards, and more.
Members of the military and government can join PenFed for free, and others can join with a small $17 donation.
PenFed Promise Visa Card
If the PenFed Platinum card isn’t quite what you’re looking for, the Promise Visa might be better suited. There are no high fees to worry about, with a $0 balance transfer fee, no penalty APR, no foreign transaction fee, and no cash advance fee.
DCU Visa Platinum Rewards
You need excellent credit for this Visa card, but it’s worth it as there is no cash advance fee or annual fee and a low cash advance APR. It’s a rewards credit card, but the same financial institution also offers a secured credit card. You need an excellent credit score for this rewards card, but the secured version is offered to applicants with bad credit.
Fort Knox Federal Credit Union Visa Platinum
By joining the American Consumer Council, you can become part of the Fort Knox Federal Credit Union and get this Visa card. Interest charges are low and there is no cash advance fee, nor is there a cash advance APR to increase your credit card debt.
How Much are Cash Advance Fees?
Cash advance fees differ from card to card, but we can use the Chase Freedom as an example. It’s one of the most popular credit cards in the United States and offers fees in line with what other cards are charging.
This card charges the larger of $10 or 5% for every cash advance. If you withdraw $20, you’ll pay a $10 fee. If you withdraw $400, you’ll pay $20. And that’s not all, as cash advances are also subject to an additional interest rate of 26.49%, which is higher than the maximum regular rate for this card.
And if you think that your airmiles or cash back will help to alleviate some of the costs, think again. Not only are cash advances excluded from reward programs, but most reward cards will prevent you from turning cash back and rewards into actual cash.
At best you can withdraw the money to a checking account (which can then be withdrawn as cash) and with most cards the money can be exchanged for discounts, travel freebies, gift cards, and statement credit.
When are Cash Advance Fees Charged?
There is a dangerous and often costly misconception that suggests cash advances are only charged when you withdraw money from an ATM. That would certainly make sense, as this is the only real way to turn your credit into cash, but these fees can actually be levied on a number of purchases, some of which may surprise you:
- Overdraft protection
- Money order purchase
- Gift certificate or reloadable gift card
- Lottery tickets
- Purchase of foreign currency
- Money spent in a casino (offline and online)
- Sending cash to another user
These fees aren’t charged by all providers all of the time, but this is generally what constitutes a cash advance fee. Generally speaking, any time you use your card to gain cash or take a significant risk, you may be hit with a cash advance fee and APR.
You may also be charged additional ATM fees and when you combine these fees with the cash advance APR, even the smallest withdrawal could cost you severely.
How to Avoid Cash Advance Fees
If you don’t use a zero cash advance credit card, the only way to avoid these charges is not to make payments in cash. If you need a large cash amount, look into a personal loan instead; if it’s a small amount, ask a friend or family member or sell something you own. Always strive to find an alternative.
By the same token, it’s better to take out a cash advance of $100 to last you for a few weeks rather than 10 staggered payments of $10. The interest payment will be the same in both cases, but in the first instance you’ll pay a fee of $10 and in the second you’ll pay $100.
Payday loans might be a viable alternative, assuming you live in a state with limited rollovers and you pay off the debt quickly. But this can also be problematic.
Cash Advance Limit
There is a limit to the amount of cash that can be withdrawn from a credit card and it’s often much less than the credit limit. This limit will depend on your credit card issuer and the ATMs from which you are withdrawing. There may also be minimum withdrawal limits for credit cards, but most providers do not have such limits in place.
It’s also worth noting that cash advance fees do not have a grace period. Typically, when you start using a new credit card, there is a grace period during which time you won’t be charged interest. With cash advances, no such period exists and those high-interest rates will commence straight away.
Bottom Line: Avoid at all Cost
Now you know how it works, you also know to avoid cash advances at all costs. Only withdraw cash as an absolute last resort, when you’ve exhausted all other options and are confident that it won’t have a seriously negative impact on your finances.